The abnormal return in an event study is described as:
A) the return earned on the day of announcement for the stock.
B) the excess return earned on the day of announcement for the stock.
C) the total return earned for the investment holding period.
D) All of these.
E) None of these.

Question

Quizplus · Accepted Answer

The abnormal return in an event study is defined as the difference between the actual return and the expected return for a stock, given market conditions and other relevant factors. Therefore, it is not just the return earned on the day of announcement (option A) or the total return earned for the investment holding period (option C). Option D is incorrect because the abnormal return is not the same as the total return, but rather the excess return above what would be expected. Option E is incorrect because there is a clearly defined meaning for the term "abnormal return" in an event study.

The Abnormal Return in an Event Study Is Described As